Tutor Perini Corporation

Good day, ladies and gentlemen, and welcome to the Tutor Perini Corporation fourth quarter and full year 2018 earnings conference call. My name is Sherry, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we will be opening the call for a question and answer session. As a reminder, this conference call is being recorded for replay purposes. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. I will now turn the conference over to your host for today, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Hello, everyone, and thank you for joining us today. With us on the call are Ronald Tutor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during today's call, we will be making forward-looking statements which reflect management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find our disclosures about risk factors that could potentially contribute to such differences in our 10-K, which we are filing today. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required by law. With that said, I will turn the call over to Ronald Tutor.

Thanks, Jorge. Good afternoon and thank you for joining us. We delivered excellent fourth quarter results highlighted by strong operating margins across all segments, particularly improved performance in the specialty contractor segment, and a very large volume of new awards that enabled us to grow our backlog by 28% year over year, setting a new record of 9.3 billion. Further, we added 2 billion of new awards in the fourth quarter, and a total of 6.5 billion of new awards for the entire year resulting in a book-to-burn ratio of 1.45. Our strong backlog growth in the fourth quarter was broad-based across all three segments and was driven in particular by the $800 million Minneapolis Southwest Light Rail project, $245 million of funding For a technology project in California, $244 million of various electrical and mechanical projects in New York City and $100 million military facility for the Air Force in Saudi Arabia. In addition, we generated solid operating cash of $56 million in the fourth quarter. The outlook for continued backlog growth in 2019 is excellent, as we expect to and in fact are booking over $2.5 billion of identified awards during the first quarter of 2019. The largest of these is the $1.4 billion Purple Line Section 3 Stations Project, which connects to the already awarded Purple Line 3 Tunnels Project, which we received last year. And that goes to the board for final approval tomorrow, which will be routinely processed. In addition, we see a sustained high level of demand in the pipeline of large civil works projects. Our growing backlog provides the foundation upon which I expect to deliver Revenue growth and increased earnings over the next three to five years. We continue to be selective and disciplined in our bidding approach. As I've said previously, there are significantly more major civil works projects hitting the bid pipeline than we have the physical ability demand. The competition is limited at best. So we are selectively choosing those projects that give us the best opportunity to succeed. As I've said previously, quite frankly, there are so few companies with the resources and experience to successfully undertake these projects that it's an interesting phenomenon facing the civil works industry today. and we have both the track record and the reputation of successfully executing these projects. We will be bidding in the next 60 days the $400 million Eighth Avenue train control project similar to the Culver Line we were awarded at $250 million earlier this year. Both projects are a part of the major works that New York City Transit continues to undertake to modify their antiquated signal systems throughout the entire transit system. If that were not enough in New York, we were recently appraised of the Mayor of New York City committing to a $52 billion infrastructure refurbishment program that will take place over the next four years. Further, other large upcoming civil bids that we are committed to bid within our organization are the $3.5 billion bus depot for the Port Authority of New York and New Jersey in downtown Manhattan, the $2 billion Brooklyn-Queens Expressway in New York City, the $1.4 billion portal swing bridge replacement in New Jersey, and $1.5 billion... What are those ones in LaGuardia? There are two feeder lines, one each at LaGuardia and at Newark. They're called peeper movers. They're a billion and a half dollars each, and those will also hit the street, I believe, by the end of 2014. Since the civil opportunities far outweigh our capacity, we will have to be selective in those we pursue. The building segment's larger opportunities include two convention center projects, One in Los Angeles, another in Las Vegas, collectively valued at $1.2 billion. A $700 million airport cargo facility called the Air Glades Perishable Air Cargo Complex, and a $300 million project in Miami. There is a $300 million Los Angeles Civic Center P3, and a $250 million Healthcare Project in California. More importantly, the building segment has already one billion of pending awards that we expect to enter into backlog in 2019, including the Choctaw Resort and Casino expansion and two other hospitality and gaming projects. The specialty contractor segment is in the process of bidding over $500 million of mechanical and electrical projects in the next two to three months. And the bidding pipeline is robust to a point of, again, testing our capacities in that arena. Next, I will provide some details on the more significant projects that contributed to our fourth quarter results, beginning with the civil segment. On the West Coast, we continue to ramp up our work on Purple Line Section 2 in Los Angeles with the construction of the tunnel launch pit commencing in Century City. After it's completed, we will begin the tunnel boring machine assemblies, followed by the start of tunneling in January. In Beverly Hills, we are beginning the relocation of utilities. in advance of commencing with the Wilshire Station in Beverly Hills later this year. In British Columbia, Frontier Kemper is progressing work on the Kamano Second Tunnel project. We also remain busy with work on California High Speed Rail and are still anticipating volume of work increasing substantially by this summer. Work also continues to progress on the San Francisco Central Subway project with a targeted completion in the first half of 2019. In the Midwest, London Construction has been active with its work on the I-74 bridge project between Iowa and Illinois, as well as many other projects contributing to their significant backlog. and is starting work on the Minneapolis Light Rail. In the Northeast, which is essentially New York, our most active projects include CMO-7 and CQ-33 for New York Transit and of course the billion, $400 million Newark Airport Terminal 1, which is advancing wealth. In Seattle, we completed the SR-99 tunnel Last year, and it has been turned over and traffic is using a completed tunnel. The building's project's largest contributors in the fourth quarter included that technology campus that we don't refer to the owner of, the Rosewood Miramar Beach Hotel for Caruso Enterprises, the Newark Airport Terminal 1 in New Jersey for the Port Authority in New York, and the Precision Cancer Medical Building at the University of California San Francisco Medical Center. The specialty contractor segment has a substantial volume of Newark higher margin work being performed over the next period of years. Recall that on the Newark Airport Terminal 1 project, Five Star Electric and WDF Mechanical hold contracts exceeding $360 million for the electrical and mechanical pieces of that $1,400 million project. In addition, they have added $244 million of new electrical and mechanical projects in the fourth quarter, positioning our segment for double-digit revenue growth in 2019. Now let me provide you with a brief update on our unbilled receivables and claims. We continue in negotiations on three major claims, have received significant offers on two of them, although not adequate. We continue to talk. We hope to bring those to conclusion over the next 90 days, but we have not been able to conclude any as of yet. We believe that with continued progress in these negotiations, we have the potential to settle in the next half a year. Overall, we anticipate strong double-digit revenue growth and higher operating margins across all segments, with noteworthy margin improvement expected in the specialty contractors segment and margin improvements in the civil and building segment. Based on our current backlog and forecast, we are establishing our earnings per share guidance for 2019 at the range of $2 to $2.30. As in 2018, we expect that our earnings in 2019 will be significantly weighted toward the second half of the year, particularly due to the extreme weather we have suffered across the country in the first quarter. With that, I will turn the call over to Gary Smalley to present the financial results.